Ahead of the company's Annual General Meeting to be held on 24th July, John Teeling, Chairman of Petrel Resources, spoke about current uncertainties in our industry and Petrel's current focus on Iraq.

"You don't need to be told how uncertain the world is. Lockdowns, quarantines, blocked exports within EU members, negative oil prices and negative interest rates. The worst recession in 300 years according to some! Higher rates of unemployment than those in the 1930's depression! Paying banks to hold your money on deposit! States borrowing at minimal costs without let or hindrance. Unprecedented does not begin to describe what's going on. Those of us educated in economics and business and who have established and managed enterprises can only plough on in the hope and expectation that the so called "New Normal" will make economic sense.

Yet despite all of the above Petrel Resources is in better shape now than it was a year ago. Certainly the Irish Offshore is now a virtual a no-go area. But our other interests, Iraq and Ghana are better. Before dealing with the projects let me address the position of the new shareholders who bought in during 2019.

In mid-2019 the board of Petrel was approached by a French based group of investors who wished to acquire and grow a listed natural resources vehicle. The group offered skills, contacts and experience in some of the areas where Petrel was active. We did Due Diligence on the principals. Issues that arose were handled. Agreement was reached and, which if fully implemented, would have seen the new group acquire 51% of Petrel for cash at a price of 1p a share, slightly above the market price at the time. Initially 29.9% of the Company was sold and various approvals and authorisations were sought to implement the remainder of the deal. In particular, Irish Takeover Panel, AIM Rules and, finally, Petrel shareholder agreement. After all approvals were obtained the investing group were unable or unwilling to subscribe for the additional shares to bring their holding to 51% of the issued capital. This despite a share price many times above the deal price. Further, shares which were part of the initial purchase, were sold despite a legally binding lock in agreement. Despite the very best efforts of the Petrel directors we failed to discover what was going on and had to resort to a High Court injunction blocking all further sales. We still do not know what really happened and who now owns a large block of Petrel shares.  A block of shares remains injuncted and cannot vote. In early 2020 we cancelled the shares due to be issued as part of the deal to move to 51% of the issued capital. All in all, a totally unsatisfactory situation. We continue to liaise with member of the group but to no avail.  

Meanwhile the ongoing operations of Petrel had to be managed. Iraq, which has been dormant for some time is once again showing life. Our Iraqi, director, Riadh, is actively promoting our ongoing interest in participating in the development of the many oil opportunities in Iraq. It remains the best place on earth to find and produce oil. The political situation is finally stabilising. We have reconnected with people who assisted us between 1999 - 2010 when we were active in the country. Though only a small company, we have a track record in Iraq, we worked there for more than a decade and have a wealth of data on the oil geology of the country. We are hopeful that we will get an opportunity to play a part in developing the oil industry.

Turning to Ghana, where Petrel holds a 30% stake in a local Ghana company (Clontarf 60%, Abbey Oil and Gas 10%) which has an interest in the Tano 2A oil exploration block in shallow water offshore Ghana. The saga of this interest goes back 12 years and also involves court activity. Agreement was reached with the Ghanaian National Petroleum Company (GNPC) but never ratified by cabinet or parliament. Attempts to void the agreement were stopped by the High Court in Ghana in 2013. Intermittent talks to solve the outstanding issues have continued for the past seven years. There has been a spike in activity in recent times involving high level meetings. This activity is on hold due to the pandemic lockdowns. It is very difficult to remain optimistic year after year but, the block is good. We have spent money on the block and have identified a number of oil plays. We will continue to push our position with the authorities in Ghana.

You are aware that exploration is high risk. Not alone do you have major geological and often technical risks but in many areas there is a political risk. But surely you would think not in Ireland. Yet the Irish offshore oil exploration industry despite spending hundreds of millions on grass root exploration has been stopped in its tracks by political changes and has little or no future. One successful oil discovery offshore Ireland would have made Ireland energy secure and provided revenue to better the community. Look at Norway. Instead, the State has forbidden all future oil exploration while in theory leaving the door open for gas exploration on licences already granted. In reality it is hard to see any more exploration in the Atlantic. Any gas discovery is likely to face years of planning difficulties. The twenty year debacle over the Corrib gas field was very damaging to Ireland's reputation.

Ireland has chosen to rely on imported oil and gas. The gas ultimately comes from Siberia. It has proven impossible to persuade the authorities that this is unsafe.  Maybe the recent experience where EU members unilaterally banned the export of medical equipment and supplies to fellow EU members might be a wake-up call. How many realise that the new French connector will supply nuclear generated electricity.

We have a 10% working interest in Frontier Exploration Licence 11/18 in the Irish Atlantic, Woodside is the 90% holder and operator. Woodside has invested heavily in a 3D seismic survey and has identified a number of plays. Adding political uncertainly to the geological risk in the Atlantic suggests that Woodside may be slow to proceed. We have dropped our other Irish oil interests.

Where to Now

The strategy is clear. We focus on Iraq while pushing Ghana with our partners. We continue to engage with the group of investors who bought the block of shares in 2019.  We welcome any and all proposals from them. To date none of their proposals come with any title. They were ideas and suggestions but of no substance.

We raised a limited amount of new money, £250,000, in early 2020 to fund an expansion of our Iraqi involvement. This adds to the money invested in new shares by the French group in 2019. So we are well funded for current activities."

John Teeling, Chairman of Petrel Resources

KeyFacts Energy: Petrel Iraq country profile